Oil prices steady as China's economic woes offset expected supply cuts

Oil prices were mostly flat on Tuesday as data showing China’s economy was still struggling with a post-pandemic recovery offset expectations of an extension in supply cuts by leading OPEC+ members Saudi Arabia and Russia.

Brent crude futures for November fell 9 cents, or 0.10%, to $88.91 a barrel. U.S. West Texas Intermediate crude (WTI) October futures rose 34 cents, or 0.4%, to $85.89 at 0315 GMT.

Saudi Arabia is widely expected to extend voluntary oil cuts into October and Russia will unveil a new OPEC+ supply cut deal this week, according to its deputy prime minister.

Moscow has already announced it will cut exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Riyadh is also expected to roll over a voluntary 1 million bpd cut into October.

“Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a sell-off in the market,” analysts from ING said in a client note.

On the downside, a private-sector survey showed on Tuesday China’s services activity expanded at the slowest pace in eight months as weak demand continued to dog the world’s second-largest economy and stimulus failed to meaningfully revive consumption.

Analysts said the markets had priced in China’s recent effort to boost the economy, offsetting support from the expected oil supply cuts.

In Japan, the world’s third biggest economy, household spending in July fell 5.0% from a year earlier, deeper than a forecast decline of 2.5% and continuing into a fifth month of falls.